Final Results and Accounts
14 March 2024
International Personal Finance plc
Full-year financial report for the year ended 31 December 2023
Principal activity
International Personal Finance is helping to build a better world through financial inclusion by providing affordable credit products and insurance services to underserved consumers across nine markets.
GOOD GROWTH AND STRONG FINANCIAL PERFORMANCE
Key highlights
| - | Strong full-year financial performance and increased final dividend | ||||||
| · | Reported profit before tax up 8.4% to £83.9m (2022: £77.4m), ahead of our internal plans. | ||||||
| · | Proposed final dividend of 7.2p per share (2022: 6.5p) results in full-year dividend growth of 12.0% to 10.3p per share (2022: 9.2p), consistent with our progressive dividend policy. | ||||||
| - | Excellent operational execution delivered further growth and continued good credit quality | ||||||
| · | Strong demand for our broad range of financial products resulted in customer lending, excluding Poland, showing year-on-year growth of 8%. | ||||||
| · | Closing net receivables of £893m (2022: £869m), demonstrating strong year-on-year growth of 12%, excluding Poland. | ||||||
| · | Lending and receivables in Poland reduced by 29% and 25% respectively, in line with guidance provided in Q4 2022, as we adapt to new regulation and rollout our new credit card product. | ||||||
| · | Actions to improve the Group's returns delivering very positive results:- Revenue yield strengthened to 55.3% (2022: 51.9%). | ||||||
| - Customer repayment performance remained robust, delivering an impairment rate of 12.2% (2022: 8.6%), in line with expectations. | |||||||
| - Rigorous focus on cost control and efficiency delivered a further reduction in the cost-income ratio to 57.0% (2022: 60.9%). | |||||||
| - | Diversified funding sources and significant headroom to fund growth | ||||||
| · | Successfully raised and extended £146m of debt facilities in 2023, with over £170m of debt funding now maturing beyond 2025. | ||||||
| · | Substantial headroom on funding facilities of £126m. | ||||||
| · | We note the improvement in debt market conditions and, together with advisors, are actively exploring options to refinance the Eurobond maturing in November 2025. | ||||||
| - | Significant progress executing strategy to take advantage of substantial and sustainable long-term growth opportunities | ||||||
| · | Over 130,000 credit cards now issued in Poland. | ||||||
| · | Continued traction in capturing the significant growth potential in Mexico through both our home credit and digital divisions. | ||||||
| · | Further new product launches including digital and retail partnership products in Romania and a pay later product in Mexico. | ||||||
| · | The Group's evolution to a more modern, multi-product, multi-channel and digitally-enabled business is now captured through the rearticulation of the Group's strategy as "Next Gen". | ||||||
| - | Poland | ||||||
| · | Lenders in Poland, including the Group, recently received a regulatory communication from the Komisja Nadzoru Finansowego (KNF), the Polish Financial Supervision Authority. | ||||||
| · | The communication sets out the KNF's views on how non-interest fees should be interpreted by credit card issuers. | ||||||
| · | Further detail is provided in the regulatory update section. | ||||||
| Group key statistics | 2023 | 2022 | YOY change at CER | ||||
| Customer numbers (000s) | 1,700 | 1,733 | (1.9%) | ||||
| Customer lending (£m) | 1,150.6 | 1,126.4 | (3.5%) | ||||
| Closing net receivables (£m) | 892.9 | 868.8 | (0.2%) | ||||
| Reported PBT (£m) | 83.9 | 77.4 | |||||
| Pre-exceptional EPS (pence)1 | 23.2p | 20.8p | 11.5% | ||||
| Full-year dividend per share (pence) | 10.3p | 9.2p | 12.0% | ||||
1 Prior to an exceptional tax charge of £4.0m in 2023, and an exceptional tax credit of £10.5m in 2022, see section on taxation for details.
Gerard Ryan, Chief Executive Officer at IPF commented:
"I am pleased to report our relentless focus on meeting our customers' needs combined with strong cost control and good capital management has driven a very positive financial and operational performance in 2023. Our strategy to grow the business is being well executed which, together with excellent operational execution, delivered profit before tax of £83.9m, well ahead of our original plans.
All of our businesses delivered good growth, with the exception of Poland where we anticipated a shrinkage as we adapt to new regulation and the rollout of our credit card product. We are now serving more than 130,000 customers with this exciting new offering and we continue to adapt and change our Polish business to customer needs and ongoing changes in regulation.
As a result of our strong performance and confidence in our growth outlook, the Board is proposing a final dividend of 7.2 pence per share, resulting in full-year dividend growth of 12.0%, in line with our commitment to deliver a progressive dividend policy.
Our strong performance in 2023, together with our robust capital and funding position, provides a great foundation for delivering further good quality growth and continuing to successfully execute against our Next Gen strategy in 2024. I would like to say a huge thank you to all my colleagues whose hard work and dedication is the key to increasing financial inclusion for our customers and delivering strong returns for our shareholders."
Alternative performance measures
This full-year financial report provides alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards. We believe these APMs provide stakeholders with important additional information on our business. To support this, we have included an accounting policy note on APMs in the notes to this financial report, a glossary indicating the APMs that we use, an explanation of how they are calculated and how we use them, and a reconciliation of the APMs we use to a statutory measure, where relevant.
For further information contact:
| Rachel Moran - Investor Relations | +44 (0)7760 167637 |
| Georgia Dunn - Deputy Company Secretary | +44 (0)7584 615230 |
Investor webcast
International Personal Finance will host a webcast of its 2023 full-year results presentation at 09.00hrs (GMT) today - Thursday 14 March 2024, which can be accessed here.
A copy of this statement can be found on our website at www.ipfin.co.uk.
Legal Entity Identifier: 213800II1O44IRKUZB59
Chief Executive Officer's review
Group performance
I am delighted with the excellent progress we have made against our strategic objectives in 2023 which has resulted in a very strong operational and financial performance for the year as a whole. We delivered profit before tax of £83.9m, up 8% on last year and surpassing our original plans, with good contributions from all our divisions.
Demand for affordable credit from consumers in our target segment remained strong and, despite continued tight credit standards against the backdrop of rising inflation, we delivered an 8% increase in customer lending, excluding Poland. In line with our expectations, lending in Poland declined by 29% as we move to being a credit card-focused business and adapt both our home credit and digital divisions to operating under new affordability regulations in this market. Closing net receivables of £893m (2022: £869m) showed good year-on-year growth of 12%, excluding Poland which saw an expected year-on-year reduction of 25%.
The rollout of credit cards in Poland has progressed well with the product showing strong customer appeal. Along with all other lenders in Poland, we received a regulatory communication from the KNF in late February 2024, regarding its expectations of the application of non-interest fees to credit cards. We are in the process of reviewing the communication with the assistance of external counsel as well as engaging with the KNF to understand the potential impact on our business. If the expectations set out in the KNF letter are implemented in their current form, we estimate that this could reduce the Group's profits by up to £10m per annum, after taking account of the strong trading performance in 2023. We will continue to adapt and change our Polish product offerings to meet both customer needs and the evolving regulatory landscape in order to deliver our target financial returns.
We continued to make very good progress against our target KPIs in 2023. The revenue yield strengthened to 55.3% (2022: 51.9%) and is now very close to our target range of 56% to 58%, whilst the cost-income ratio reduced to 57.0% (2022: 60.9%) as we maintained our strict focus on cost control and efficiency. We are continuing to identify areas where we can improve efficiency and deploy technology, and we are making good progress towards our target range of 49% to 51%. The impairment rate increased to 12.2% (2022: 8.6%) and this was in line with our plans and remains below our overall target rate of between 14% to 16%, reflecting the good quality of our receivables portfolios. Tight credit standards coupled with a strong operational rhythm, meant that customer repayment performance remained robust in 2023, despite the challenging macroeconomic landscape for our customers.
Our financial model underpins our purpose to build a better world through financial inclusion and targets a return on required equity (RoRE) for the Group of 15% to 20%, which we consider to be sustainable and balances the needs of all our stakeholders. Our annualised pre-exceptional RoRE showed a modest improvement to 14.8% (2022: 14.6%), which reflects a very good performance from each of our businesses to mitigate the impact of reduced returns in Poland as we transition the business through 2023 and 2024. The European and Mexico home credit divisions both delivered our target returns of around 20% whilst returns in IPF Digital improved as we continue to make good progress in capturing the excellent growth opportunities which will deliver both scale and our target returns.
Our Group continues to have a very well-capitalised balance sheet and robust funding position. Continued success in diversifying our funding base and refinancing our existing facilities resulted in significant headroom of £126m on our debt facilities at the end of 2023.
We have previously communicated our plans to deliver a progressive dividend policy whilst absorbing the financial impact of transitioning our business in Poland. Reflecting our confidence in executing the Group's strategy and realising the long-term growth potential of the business, we are proposing a final dividend of 7.2 pence per share, bringing the full-year dividend to 10.3 pence per share, up 12.0% on 2023.
Full details of the Group financial performance are detailed in the financial review section.
Please refer to the associated PDF document to view the full announcement.
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